Liquidity Risk: Granted, liquidity was an issue in the crisis. But even this study admits that there was also credit risk at work – illiquidity wasn’t arising from pure panic, but rather from severe risk-aversion arising from justified concerns re. institutions’ solvency. The solution, therefore, wasn’t guarantees or LOLR operations (except initially); but rather to kill off the solvency concerns by determining who was solvent & who wasn’t, and killing off the latter. I.e., the “Swedish solution”.

China & Gold:

The last couple paragraphs of this NYT article give the lie to those who think China can easily diversify out of dollars via gold stockpiles. And, as Setser points out, other commodities have non-trivial risks, too.

When you read the history of the Great Depression, it’s hard not to notice another horrible cost: Unemployment undermines support for a free society by robbing ordinary people of their independence and self-respect.

This is the modern-economy equivalent of “No civilization is more than three meals away from collapse”, and one of the major reasons I’m not a liquidationist.

If non-teachable and teachable employees can both do well on aptitude tests, that is not a good signal. But if only teachable employees can sit through college classes and pass them, then a college degree is a good signal.

One possible counterpoint to the notion that college is basically an IQ test – clearly, college does “test” for other stuff as well.